Subject to the attainment of non-UK residency following a UK pension transfer for tax purposes, after five complete tax years, your QROPS pension value upon death will be paid out within the rules of the appropriate QROPS scheme. This will, most likely, be in the form of a lump sum payment, payable to the beneficiaries as nominated by you.
There may be other options available to you, for the payment of death benefits, options that could provide tax planning opportunities, giving greater value to your financial fund overall. After undertaking a UK pension transfer, depending on the tax rules that apply in your country of residence, you may be able to leave your pension to your beneficiaries without the deduction of tax. In many countries of residence it is possible to bequeath your pension free of any tax liability.
However standard UK tax rules apply in instances where less than five complete tax years of non-UK residency have been completed:
If, for example, you are drawing a USP or Unsecured Pension, also know as an Income Drawdown Pension, before your 75th birthday, all of the remaining fund may be taken as a lump sum by your beneficiary but will be subject to 35% taxation.
If you were to die at 75 years of age onwards and you are in an ASP or Alternatively Secured Pension, any lump sum due to your beneficiaries, with the exception of political parties and charities, could be liable to 40% inheritance tax. The payment may also be subject to an unauthorised payment surcharge plus an authorised payment charge and a scheme sanction charge, which could result in a tax liability equalivalent to a total of 82% of whatever the pension fund may be. Unlike a QROPS pension.
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